Bunds Rise as Juncker Says No Greek Aid Decision Before October

Aug. 22 (Bloomberg) -- Germany’s bonds advanced, with 10-year yields dropping the most in nearly three weeks, after
Luxembourg Prime Minister Jean-Claude Juncker said a decision on
providing more aid to Greece won’t be reached before October.

German two-year notes rose for the first time in three days
after a sale of the securities today attracted bids for more
than the target amount. Spanish bonds halted a seven-day gain
after yields dropped to a 10-week low. German Chancellor Angela
Merkel, who meets French President Francois Hollande in Berlin
tomorrow, said she’s willing to discuss Greece’s request for
more time to meet terms of its international rescue.

“We’re in a situation where there is a high degree of
uncertainty and a number of key meetings are taking place in the
euro zone in coming days,” said Orlando Green, a fixed-income
strategist at Credit Agricole Corporate & Investment Bank in
London. “There is still not a sense of one view coming from
these meetings. Our medium-term view is for the periphery to
rally from here but it will be bumpy along the way,” he said
referring to bonds of Europe’s lower-rated nations.

Germany’s 10-year yield fell 10 basis points, or 0.1
percentage point, to 1.46 percent at 4:34 p.m. London time after
dropping as much as 11 basis points, the most since Aug. 2. The
1.75 percent bond due in July 2022 rose 0.92, or 9.20 euros per
1,000-euro face amount, to 102.665.

“We’re waiting for the troika report” on Greek progress
in implementing the conditions for aid, Juncker, who heads the
group of euro-area finance ministers, told RTL Television
Luxembourg in an interview posted on the government website.

‘More Time’

Greek Prime Minister Antonis Samaras called for “more
time” to carry out policy changes to deal with his nation’s
debt crisis before meeting with Juncker in Athens today.

“All we want is a little more air to breathe to get the
economy going and increase government revenue,” Samaras was
quoted as saying in an interview with Germany’s Bild newspaper.
“More time doesn’t necessarily mean more money.”

Germany received bids of 6.24 billion euros for the two-year notes it sold today, exceeding the 5 billion-euro maximum
target, according to a statement from the Bundesbank.

The nation sold the securities at an average yield of zero
percent, compared with minus 0.06 percent at an offering of
similar-maturity debt on July 18.

The yield on the previously issued two-year securities fell
one basis point to minus 0.06 percent. The yield climbed above
zero yesterday for the first time in five weeks.

Most Volatile

Volatility on German government bonds was the highest in
euro-region markets today, followed by the Netherlands and
Finland, according to measures of 10-year bonds, the spread
between two-and 10-year securities, and credit-default swaps.

Greek bonds maturing in February 2023 rose for a fourth
day, even after Juncker’s comments. The yield declined 34 basis
points to 23.85 percent after dropping to 23.81 percent, the
lowest level since May 10.

Spain’s 10-year yield climbed six basis points to 6.28
percent after falling to 6.15 percent, the lowest since June 11.

The yield on similar-maturity Italian debt was little
changed at 5.66 percent after declining to 5.57 percent, the
least since June 7.

BlueBay Asset Management, which manages $41 billion in
fixed income and alternative investment products, has been
buying Spanish, Italian and Irish bonds since European Central
Bank President Mario Draghi pledged on July 26 to do “whatever
it takes” to save the euro, according to Mark Dowding, a
London-based fixed-income portfolio manager at the company.

BlueBay has been buying the bonds “over the past month and
we’re overweight today,” Dowding said in an interview with Guy
Johnson and Francine Lacqua on Bloomberg Television’s “City
Central.” “If you ask me a month from now our position may be
very different.”

German government bonds returned 2.6 percent this year
through yesterday, according to indexes compiled by Bloomberg
and the European Federation of Financial Analysts Societies.
Spanish debt fell 1.5 percent, and Italy’s rose 11 percent.